By Jonathan Burgos
July 7 (Bloomberg) -- Asian commodity stocks declined after oil and metal prices slumped, countering gains in the region by utilities and technology companies.
Rio Tinto Group Ltd., the world’s No. 3 mining company, and Japan’s Mitsui & Co., which gets more than half its profit from commodities, both sank more than 2 percent. Tokyo Electric Power Co., Asia’s largest utility, rose 1.2 percent to a two-week high on optimism energy costs will fall. Samsung Electronics Co., the world’s largest memory-chip maker, gained 2.4 percent after BNP Paribas SA recommended investors buy the stock.
“Investors are still cautious,” said Yoji Takeda, who manages $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. “They are looking for further evidence that earnings and economic data are improving before putting fresh money into the market.”
The MSCI Asia Pacific Index lost 0.2 percent to 101.90 at 2:44 p.m. in Tokyo, with volatility levels on the gauge slipping to a six-month low. The index has slipped 3.2 percent since climbing to an eight-month high on June 12 as disappointing economic data damped demand for equities. The measure has gained 44 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average dropped 0.5 percent to 9,634.92. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, lost 2.5 percent after shipping rates fell for a fourth day. Australia’s S&P/ASX 200 Index fell 0.3 percent as the central bank kept interest rates unchanged at the lowest levels in about 50 years.
LG, China Development
Indonesia’s Jakarta Composite Index gained 1.5 percent a day before presidential elections. South Korea’s Kospi Index added 0.4 percent, led by LG Electronics Co., which climbed 4.1 percent on plans to boost revenue from its Mexican factories. China Development Financial Holding Corp. jumped 5.7 percent in Taipei after selling a stake in a building.
Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The measure gained 0.3 percent yesterday as Moody’s Investors Service said it may lift Brazil’s debt rating.
Rio Tinto declined 2.2 percent to A$47.44. BHP Billiton Ltd., the world’s largest mining company, lost 0.6 percent to A$32.42. Mitsui & Co. dipped 2 percent to 1,061 yen. Copper futures in New York fell 0.5 percent in after-hours trading, taking declines in the past three days to 3.5 percent.
PetroChina Co., China’s largest oil producer, lost 1.1 percent to HK$8.25 in Hong Kong. Woodside Petroleum Ltd., Australia’s second-largest oil producer, declined 1.3 percent to A$40.32. Crude oil slid 4 percent to $64.05 a barrel yesterday in New York, the lowest settlement since May 27.
Lower Volatility
“Volumes are light and commodities are tumbling, which is encouraging investors to stay on the sidelines until they can get a fix on the direction of the economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co.
Ten-day implied volatility on the MSCI Asia Pacific Index has dropped to the lowest level since January, data compiled by Bloomberg show. The average valuation of companies on the index climbed last week to 1.5 times the net value of assets, close to the highest level since September.
“We’ve hit our peak for now, and there will be a correction, although likely not a large one,” said Hisakazu Amano, who helps oversee some $16 billion at T&D Asset Management Co. in Tokyo. “There were expectations that the market and economy would stage a quick rebound, but we are seeing that the recovery will take time.”
The Bank of Japan maintained a cautious stance on the economy in its quarterly report yesterday even as it became more optimistic on all regions of the country for the first time since January 2006.
Baltic Dry Index
Glenn Stevens, governor of the Reserve Bank of Australia, said today that there was “still scope” to reduce interest rates if necessary. Stevens, who cut interest rates six times between September and April, left the bank’s overnight cash target rate at 3 percent today.
Mitsui O.S.K. sank 2.5 percent to 553 yen. STX Pan Ocean Co., South Korea’s biggest bulk-commodity shipping line, fell 3.1 percent to 11,100 won. The Baltic Dry Index, a measure of shipping costs for commodities, retreated 4.1 percent yesterday, taking losses since June 3 to 21 percent.
Tokyo Electric gained 1.2 percent to 2,480 yen on optimism lower oil prices will cut its fuel bill. The company slashed its use of crude oil and fuel oil to generate power after it restarted a nuclear reactor on May 19. Chubu Electric Power Co. climbed 2.4 percent to 2,305 yen.
Samsung, Sumco
Samsung Electronics gained 2.4 percent to 649,000 won. The company had its rating upgraded to “buy” from “hold” at BNP Paribas, which said the company’s second-quarter earnings guidance was “significantly” higher than analysts’ expectations. The brokerage lifted its share-price estimate to 740,000 won from 630,000 won in a report today. Sumco Corp., the world’s second-largest maker of silicon wafers, jumped 5.9 percent to 1,465 yen. The stock was lifted to “overweight” from “underweight” at Morgan Stanley, which said wafer prices are unlikely to fall further.
In Seoul, LG Electronics, the world’s third-largest maker of liquid-crystal display televisions, climbed 4.1 percent to 128,000 won. The company plans to boost revenue from its Mexican factories by 54 percent to $4 billion as it expands production.
China Development, the owner of Taiwan’s largest venture- capital company, rose 5.7 percent to NT$8.30 after selling its 19.55 percent stake in the Taipei 101 building to a company controlled by the Ting Hsin International Group.
Daihatsu Motor Co. advanced 7.3 percent to 997 yen. Japan’s largest minicar maker was rated “buy” in new coverage at Deutsche Bank AG and was raised to “buy” from “underperform” at Bank of America Corp.’s Merrill Lynch unit.
To contact the reporter for this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net.
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